Property Investment is NOT a Passive Pastime!

publication date: Apr 9, 2010
author/source: Kate Faulkner, Author of Which? Property Books

Property Investment is NOT a Passive Pastime!

Securing big enough returns from Buy to Let in the UK is going to be tough over the next 10 years. Property price growth isn't guaranteed - whatever any 'property salesman' tells you! 

Having spent over 10 years watching the property investment industry 'flourish' then 'collapse' and 'rise again' I'm sick and tired of the following property investment company claims and marketing spin:-

1. Become a property millionaire
2. Armchair investment
3. Passive property investment
4. No money down deals
5. Below market value deals

"Investing in property is NOT an 'armchair' occupation" says Kate Faulkner, property consultant and author of Which? property books. 

Having recently researched the ways in which different property investment companies work, they seem to be three types:-

Professional, upfront and transparent
Unfortunately these are few and far between. You only know if a property investment company or advisor is one of these after a good few years of seeing whether they deliver or not.

The easiest way to spot them is that they explain and present the pros and cons of property investment. They are also more likely to check out what funds you have and make sure that you can afford to invest in property rather than just 'fitting a package' to your budget.

These companies will always insist that you visit a property and area BEFORE you buy. They should insist you use your own RICS surveyor and consult your own legal person.

They should not be offering 'creative finance' and 'no money down deals'.

The Market will always Go Up!
This set of property investor mentors and investment companies actually believe that property will always go up value, and will probably outperform every other type of investment.

The truth is it won't. That's not me being pessimistic, that's me be honest and realistic. If you invest in property with a company or individual that hasn't worked this out by now, then they are likely to come a cropper at some stage - and will probably take you with them! 

Don't believe me? Then checkout why companies like Passive Investments and Inside Track went under!

You can spot these guys by as they will predict massive returns that are 'nice to have' but unlikely. For example, I've seen companies predict more than 8% annual capital growth year on year. The real long term return for property is 3%, not 8%, not 10% and certainly not the 20% or more others quote.  

We'll take your money, you take the risk!
These are the guys (sorry, genuinely few are girls!) that I call the 'Ra Ra' set! They will be very charismatic. They will make you laugh, they will at times reduce you to tears with a heart breaking story.

They will then suck you in with a 'free this when you buy......' or 'all of this is worth £xxx but it's just £5 if you buy today'. These deals will have some sort of deadline to them, however if you subscribe to their 'free newsletter' they will keep sending you the same deal option time after time. They will also email you daily or at least weekly with deals or 'tips' on investing. None of these of course will warn you about the fact that property can go up as well as down!

How do you spot these guys? Well they love titles such as "Become a property millionaire"; "Armchair investment"; "Passive property investment"; "No money down deals" and some amazing "Below market value deals" all of which you are unlikely to secure without them advising you or paying thousands of pounds to secure the property.

These companies will rarely let you use your own IFA or mortgage broker, legal company and they will always offer you a RICs survey or to organise one for you. The reason they will give you for using their own contacts is because other 'professionals' don't understand 'creative financing' or 'workarounds' or 'loopholes' in the system.

So, what do you do if you want to invest in property with the help of professionals?

Top Tip One
Be prepared to put in the leg work to find a company that will explain the pros and cons of property investment. Make sure that you do a police and/or credit check on the company and directors you are looking to work with and download their accounts from Companies House if available.  

Top Tip Two
Make sure you check people and companies out carefully and NEVER NEVER NEVER hand over money for a property 'to find out more details' about the property.

Top Tip Three 
Ask an independent legal person to review their terms and conditions of investing with them. It may only cost £50-£100 for their thoughts but it could save you thousands of wasted pounds.

Think you've got a great deal for property investment? Then email the postcode, property value and rental income and we'll check it out for you! Call us on 0845 838 1763.

Need help with a property problem? Have a question? Why not call Designs on Property on 07585 897128 or Contact Us via email.
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